Why Are We Still in a Recession? The Shape of the Crisis and „Too-Big-to-Fail“

Jim Hamilton sends us to John Cochrane, who makes a number of good points. Cochrane agrees with the conventional wisdom that it was not any fundamental change or news about preferences, technologies, or the risks of undertaking production and hiring workers but rather the bankruptcy of Lehman Brothers that turned us from being in a small recession to being in the deepest recession since the Great Depression--to perhaps being in a (little) depression of our own:

John Cochrane: The signature event of this financial crisis was the... whatever you choose to call it... in late September of 2008.... Short-term credit dried up, including the normally straightforward repurchase agreement, inter-bank lending, and commercial paper markets.... Why would Lehman's failure cause a panic? Why, after seeing Lehman go to bankruptcy court, would people stop lending to, say, Citigroup, and demand much higher prices for its credit default swaps (insurance against Citi failure)?... We did not see a secondary wave of creditors forced into bankruptcy by Lehman losses.... Sure, there was some mess-- repos in the United Kingdom got stuck in bankruptcy court, some money market funds "broke the buck" and had to borrow from the Fed--but those issues are easy to fix and they do not explain why Lehman's failure would cause a widespread panic. What is more, Lehman's failure did not carry any news about asset values; it was obvious already that those assets were not worth much and illiquid anyway.

Cochrane makes the true and obvious but understressed point on the origins of our macroeconomic crisis that mortgage defaults in the desert between Los Angeles and Albuquerque are simply not large enough to justify the $25 trillion global fall in the value of financial assets that has hit our economies:

The underlying decline in wealth from the housing bust was not that large.... Most estimates put subprime losses around $400 billion. The stock market absorbs losses like that in days...

Indeed, relative to the size of the economy the losses during the crash of the dot-com bubble were four times as large. But the collapse of the dot-com bubble did not drive unemployment up above 10% even with extraordinary government interventions to create a liquidity tsunami to try to float the markets.

Cochrane makes the true and obvious point that what is special about our current situation is not that there were losses, or that those losses were the result of the unwinding of irrational exuberance, but rather how those losses hit overleveraged and overexuberant banking and shadow banking systems:

[M]ortgages were held in very fragile financial structures. An extreme example: many mortgages were pooled into securities, and the securities were held in special purpose vehicles (SPVs), funded by rolling over short term commercial paper with an off-the-books credit guarantee from a large bank. Less extreme: when Bear Stearns failed, it was holding a large portfolio of mortgage-backed securities (MBSs) funded at 30-to-1 leverage by overnight debt. In both cases, when the mortgages lose value, the debt-holders refuse to renew their loans and the whole thing blows up...

But then it seems to me that his argument starts to jump the tracks here:

We are left with only one plausible explanation for why Lehman's failure could have had such wide-ranging effect: After the Bear Stearns bailout earlier in the year, markets came to the conclusion that investment banks and bank holding companies were "too big to fail" and would be bailed out. But when the government did not bail out Lehman, and in fact said it lacked the legal authority to do so, everyone reassessed that expectation. "Maybe the government will not, or cannot, bail out Citigroup?" Suddenly, it made perfect sense to run like mad...

And it goes off the rails, crashes, and burns here:

[T]he central problem is how to escape the bailout expectations trap. To do this, we have to finally define what “systemic” means. And then, we must define clearly what is not systemic, and thus should and will be left to fail next time—we really mean it! This limit must be written in law or in regulation. We cannot rely on the good intentions of powerful administrators; Odysseus knew he had to tie himself to the mast. The only way to limit expectations of a bailout is for the government to give up the legal authority to do it. Lehman is actually a great example: it went to bankruptcy because the government could not save it. We need more of that. If everybody had known that ahead of time, rather than have it emerge from the usual weekend conclave in Washington, there likely would have been no panic because Lehman’s failure would not have signaled anything about the government’s commitments to Citigroup...

To see what is wrong Cochrane's story, let's start by summarizing it: It is that (i) the failure to rescue Lehman caused fears that the government would not rescue anybody, and so (ii) it was rational for everyone to panic and try to dump their risky assets. In Cochrane's view, the problem is that asset prices collapsed when financiers realized that the government's promise to bail-out too-big-to-fail banks was empty. That shock sent the real economy into a tailspin. And the solution is never to make any bail-out promises to begin with: if the promises aren't made, then people cannot fear that the promises are empty, that fear cannot generate a sudden collapse in asset prices, and so the economy cannot be sent into a tailspin.

But remember what happened in the immediate aftermath of Lehman: the U.S. government nationalized AIG and settled its liabilities at 100¢ on the $; Hank Paulson got down on his knees before Nancy Pelosi; the Treasury was given $700 billion to spend to make sure that there were no more Lehmans. After the creation of the TARP, we were all much surer that the U.S. government would rescue Citi if it needed rescue than we had been in the months between Bear-Stearns and Lehman. In point of fact, the government's promises to rescue too-big-to-fail banks weren't empty: the government has lived up to them.

The logic of Cochrane's argument implies that the passage of the TARP should have fixed the problem: the aftermath of Lehman saw "[no] secondary wave of creditors forced into bankruptcy by Lehman losses... [some] issues... easy to fix... Lehman's failure did not carry any news about asset values..." and the passage of the TARP is good news for the likelihood of bailouts. So, Cochrane's story leads us to think, everything should have been completely fine in the aftermath of the TARP: asset prices should have immediately bounced themselves back up to their pre-Lehman levels, and the storm clouds should have dissipated.

So why are we still in a deep recession?

And why were the flashpoints of the ovespeculation crash found not among institutions that were too-big-to-fail and were bailed out (Citigroup, Goldman-Sachs, JPMorgan Chase) but instead among institutions that were definitely not too-big-to-fail--and have failed--like Bear Stearns, Lehman Brothers, WaMu, Wachovia, and Countrywide?

A crisis that was caused by excessive confidence in the government's implicit guarantee of too-big-to-fail financial institutions would have had a very, very different shape than the crisis we are now in.

„Abiotisches Öl im Romashkino-Ölfeld?“

Der ASR-Blog veröffentlichte ein Interview mit dem russischen Professor Vladimir Kutcherov zur Entstehung des abiotischen Erdöls. Nach dem sich bereits der Querschuss "Peak Oil existiert nicht?" mit einigen nicht belegbaren Behauptungen, wie "Uganda hat so viel Ölreserven wie Saudi Arabien" bzw. "Sudan hat mehr Öl als Saudi Arabien" beschäftigt hat, noch ein letzter Nachtrag.

Professor Kutcherov bestätigt in dem Interview die Frage, ob sich gewisse Ölfelder in Russland wieder aufgefüllt haben mit "selbstverständlich"! Laut Kutcherov soll sich das Romashkino-Ölfeld, durch eine nichtorganische Quelle aus großer Tiefe wieder auffüllen.

Wie schon in den anderen Öl-Berichten des ASR-Blogs, konkrete Angaben zu aktuellen Fördermengen, wie viel abiotische Öl und vor allem in welchen Zeitraum es nachläuft - Fehlanzeige - dafür wieder die umfassende Suggestion vom unendlichen Öl.

Das Ölfeld Romashkinskoye, ehemals eines der zehn größten Ölfelder der Welt, in der russischen Republik Tatarstan wird vom russischen Ölkonzern Tatneft betrieben. Tatneft gibt für das Gesamtjahr 2008 die geförderte Menge Öl aus Romashkinskoye mit 15,204 Mio. Tonnen an, dies entspricht 300'000 Barrel täglich. 1970 wurden 1,6 Millionen Barrel täglich gefördert. Tatneft gibt in seinem Geschäftsbericht zum 3. Quartal 2009 den Förderabfall seit dem Hoch mit über -80% an ("As Romashkinskoye field, the Company’s largest, along with certain other fields, is more than 80% depleted")!

Ein Ölfeld mit einem Förderrückgang von über -80% als Beleg für das Nachlaufen abiotischen Öls zu benennen ist wenig seriös. Als Minimum fehlt der Hinweis das ein Nachlaufen aus der tiefen Quelle wesentlich langsamer abläuft als die Förderung, sonst hätte es diesen dramatischen Förderabfall gar nicht gegeben! Deshalb ist auch der starke Förderrückgang beim Romashkino Ölfeld, genauso wie der des russischen Giant Fields Samotlor eher Beleg für die Hubbertkurve als für abiotisches Öl!

Die Fördermengen der größten Ölfelder Tatnefts aus dem Jahr 2008. Insgesamt förderte Tatneft 2008 25,766 Mio. Tonnen bzw. 515'000 Barrel täglich. Der Anteil Romashkinskoye an der gesamten Ölförderung Tatnefts betrug knapp 60%.

In der Pressemitteilung vom 13. Januar 2010 gibt Tatneft seine Ölförderung für das Jahr 2009 mit 25,85 Mio. Tonnen an, dies ist eine Steigerung von +0,3% zu 2008, nach einer Steigerung von +1% zu 2007. Detailliertere Angaben für die Produktionsmenge von Romashkinskoye sind noch nicht veröffentlicht, eine relevante Steigerung erscheint aber auf Grund der gemeldete Gesamtfördermenge Tatnefts als unwahrscheinlich, zumal Tatneft immer wieder mal kleinere Ölfelder findet und in Betrieb nimmt!

Professor Kutcherov meint das Nachlaufen von Romashkinskoye ist nicht durch eine sogenannte „horizontale Migration“ zu erklären",....... vielleicht läuft aber auch gar nichts nach, weder horizonatal noch aus der Tiefe, sondern das Halten der Fördermenge auf niedrigen Niveaus ist auf die verbesserten Fördertechniken und auf die riesige Ausdehnung des Ölfeldes zurück zuführen. Am 3. August 2009 meldete Tatneft die Inbetriebnahme von 200 neuen horizontalen Brunnen und von 50 horizontalen Bohrlöchern in den Ölfeldern Tatarstan. Ein gewichtiger Teil dieser horizontalen Bohrtechnik ist sicher am Romashkinskoye Ölfeld eingesetzt, denn dessen gewaltige Ausdehnung von 3000 Quadratkilometern und von zuletzt 2006 geschätzten verbliebenen Reserven von 3,25 Mrd. Barrel, lassen sicher eine weitere Ausbeutung auf Förderniveau jenseits der Hochs aus den 70ern zu.

Hinweise auf abiotische Öl, gar einem Nachlaufen von Öl sucht man auf der Webseite von Tatneft vergeblich und dies ist ein weiterer Anachronismus bei einem börsennotierten Unternehmen, aber Tatneft ist sicher auch Bestandteil der Verschwörung!

Ob es abiotisches Öl gibt oder nicht ist letztlich eine müßige Scheindiskussion. Wichtig wäre dann alleine die Menge und ob es auch nur ansatzweise so schnell nachläuft wie das Öl gefördert wird! Beim Tiefseeöl sind vor allem die enormen Förderkosten für das Öl aus über 8'000 Metern Tiefe entscheidend. Denn das ERoEI (Energy Returned On Energy Invested) verschlechtert sich auf jeden Fall gravierend, im Vergleich zu den noch heute leicht förderbaren konventionellen Ölfeldern und der Nettoenergieertrag ist aber nun mal das Entscheidende!

Auch nach dem Interview mit Professor Kutcherov gilt, billiges Öl in rauen Mengen wird das abiotische Öl nicht ersetzen!

Reloaded: "Peak Oil existiert nicht?"

Quelle Daten: Tatneft.ru

Kontakt: info.querschuss@yahoo.de

Trouble At The Evil Lair

The recent announcement of Apple’s iPad ruffled some feathers at the evil lair:

No wonder AAPL has been tanking lately - Adolf has launched a new Blitzkrieg against Jobs’ HQ in Cupertino. I just came back from the Bay Area and I must tell you - it’s nothing but blood and tears up there. And rain, of course there’s that never ending sulfuric rain. It’s like a scene out of Code of Duty - World At War - only with a Starbucks with free WiFi on every corner.

Tim Knight is MIA - rumor has it that he is hiding in his nuke proof bunker with a five year supply of MREs, several cases of Dom Perignon, and a lifetime subscription to vivid.com. Unfortunately his bulk order of toilet paper didn’t make it through the front lines - probably not a pretty picture down there.

I need to run and upgrade the laser canons on my genetically modified sharks. Not sure I have time to post charts later today as I’m pinned down under sniper fire. Fortunately I speak German - fools them every time ;-)



Contest Winners – Week Two (by Biffermas)

Stock_monkey  It was another impressive performance by the Slope traders.  Thanks again for everybody who participated and shared their trading ideas!

This week's contest received more short entries than long, and favored large-caps over smalls.  Longs were systematically hammered, and a great percentage (75%) of short positions ended the week with positive gains.  On the long side, merely one of nine managed a positive return, not surprising considering the broad market declines. 

I won't be holding a contest this coming week, since I'll be traveling to Mexico Wednesday through Sunday.

Large Cap Winner -  AngryWetCat, with his CMC short.  This ended the week with an 8.7% gain.  Congratulations!



AngryWetCat: First, let me say to win when thrown in the bears den with the Slopers is an honor.  The people there are really good and are on top of their game.  That's why Tim's blog is the best out there.  So many smart people willing to share what they know.

Second, I suck at picking individual stocks.  So I needed a little help. I went back to my roots:  PnF charting.  I started with the bottom two sectors in the market, Platinum and Precious Metals and Metals, Non Ferrous.  Thinking about the potential for volatility in the PM's, I focused on the Non Ferrous Metals.  I was looking for companies that had negative relative strength when compared to the S&P Equal Weighted Index, negative weekly and daily momentum, were below both the 50 and 200 day MA, were on sell signals when compared to their peers and were forming bearish triangles.  Putting all of this in Dorsey-Wright's screener, it was a fairly short list.  It didn't take long to find CMC.  It had fallen apart in September, and showed no signs of gaining back momentum anytime soon.

So that was my pick.  The ideal entry would have been between 17 and 17.25, but that's life.  Take what the markets give you.

Small Cap Winner Fayssoux for an 9.0% gain shorting SNF.  I was unable to contact Fayssoux so I'll post his original entry as explanation for his position.  He's been absent (fighting crime?) over the last several days.  Well done, Underdog!


  Fayssoux chart 


Other notable performers this week:


















No notable long performances occurred.  Bulltard of the week is me (Biff) for a 1.5% gain in FLXS. 

Implications For Gold In The Aftermath Of The Greek Crisis

With the euro having dropped substantially from a high of around $1.51 to less than $1.40 in the span of a few short months, it has sent gold buyers looking for cover, mostly as a function of the linear (and at times sigmoidal) inverse correlation between gold prices and the DXY which throughout 2009 has held surprisingly strong. Yet will a dollar scramble prove that the recent flight to gold has been premature? BofA believes that while the near-term implications for gold are as of yet undecided, relying on both € (bearish) and risk (bullish) signals, the long-term drivers for gold should be price supportive, especially for EUR-based investors. Proper positioning can be adopted using OTM gold calls, which are not only no longer as rich as they were a mere month ago, but would benefit substantially should Greece indeed follow through with an actual default and result in a flaring of all risk indicators, further precipitating a flight to euro alternatives, among which the dollar, and gold, are dominant.

Bank of America suggests:

In the case of an actual default, even an orderly one, increased systemic risk is likely to support gold prices as investors look for a safe haven. The more disorderly the default turns out to be, the more upside we see on gold. However, if Greece just muddled through the crisis or ends up being bailed out, gold may not fare that well. If the Greek problem does not spread to other countries in the Euro area, gold prices are likely to suffer due to a weaker EUR against the USD.


[T]he long-term consequences of Greece’s debt crisis for gold prices are clearly constructive, in our view. Emerging Market central banks are ever more aware that gold is one of the few viable alternatives to the USD. A deterioration of Greece’s creditworthiness, even if bad for the EUR, should support gold prices in the long run, in our view.

The main question, as discussed previously, is how will EM central banks decide to allocate their trade surplus FX reserves. Contrary to some gold-bearish perceptions, it is very likely that an increasingly deteriorating Greek situation, will force EM CBs not only to unwind € holdings and use the resulting capital to purchase dollars, but to augment their gold reserves as well. Thus the price determining factor will be decided in the marginal scramble for dollars versus gold.

Emerging market central banks (EM CB) are ever more aware that gold is really one of the few viable alternatives to the USD. Top holders of currency reserves like China, Russia or India will likely need to increase their exposure to gold over the coming months and years as the value of fiat currency reserve holdings like the USD or the EUR comes into question. The obvious problem with diversification is that there is simply not enough gold to go around. So a deterioration of Greece’s creditworthiness, even if negative for the EUR, should be supportive of gold prices in the long run, in our view.

And with gold prices still, presumably, reflective of a dollar-destruction rampage courtesy of the Federal Reserve, what would be the proper way to express a cheap bullish bias toward a spike in gold prices should a risk-flaring episode come back once again? BofA suggests that clients look to gold OTM calls, which are no longer a ripoff compared to ATM calls. In fact the call skew in gold, which still bullish, is half as expensive as it was on November 20, 2009. Yet investors most likely to benefit from such appreciation would likely not be USD-based speculators but those found in a EUR regime.

In our view, gold OTM calls look appealing for investors willing to play a potential Greek default through the gold market. Volatility levels have been declining and 3M ATM implied vols are now trading at levels last seen in late 2007. While the gold options market continues to price in appreciation, together with the CNY and the JPY, the call skews in gold have become less pronounced. That is, OTM calls are no longer as rich as they used to be when compared to ATM calls. In the event of a default, gold prices and volatility are likely to spike. If Greece’s problems are contained and the EUR (and gold prices) suffers, investors are protected on the downside. USD-based investors may find gold to be an ineffective hedge in this event. However, EUR-based investors could, in our view, hedge by buying gold calls in EUR, as the price of gold in EUR terms should remain well supported.


The biggest concern for outright gold longs will be whether the transfer in mentality from one of continuous dollar debasement in which the demand would come from traditional USD-based investors seeking to hedge and capture stock gains by allocating increasing capital to gold, to a perspective of gold as an increasing investment allocation for central banks, who seek to abandon the euro as a capital flow and pursue less risky exposure. Should this increased central bank demand be coupled with lack of incremental selling by those who already are in possession of Gold spot and future positions, and the probability for increasing gains in the fiat-alternative seem to accelerate. Lastly, for some additional insight into the crystallizing plight of the German government vis-a-vis Greece, as well as the increasingly torn fabric of the European Monetary Union, we strongly recommend the latest piece by Evans-Pritchard, "Should Germany bail out Club Med or leave the Euro altogether?"


England: GlaxoSmithKline streicht weitere 4.000 Stellen

77 Fraud, Money Laundering, Insider Trading, and Tax Evasion Investigations Underway Regarding TARP

Inquiring minds are reading the SIGTARP Quarterly Report To Congress. The report is a massive 224 pages long. I will do my best to condense it down to the critical highlights involving Fraud, Money Laundering, Insider Trading, etc.

Let's start with the SIGTARP mission, then the findings.

SIGTARP’s mission is to advance economic stability by promoting the efficiency and effectiveness of TARP management, through transparency, through coordinated oversight, and through robust enforcement against those, whether inside or outside of Government, who waste, steal or abuse TARP funds.
Let's dive into the 224 page report and see how well TARP, and the alphabet soup of lending facilities met their stated goals.
On the positive side, there are clear signs that aspects of the financial system are far more stable than they were at the height of the crisis in the fall of 2008. Many large banks have once again been able to raise funds in the capital markets, and some institutions — including some that appeared to be on the verge of collapse — have recovered sufficiently to repay their TARP investments years earlier than most would have predicted. These repayments and the sales of the warrants associated with them have meant that Treasury (and thus the taxpayer) has turned a profit on some of the individual TARP investments; as a result of these repayments, among other positive developments, it now appears that the ultimate cost of TARP to the American taxpayer, while still substantial, might be significantly less than initially estimated.
Mish: The idea that there are "profits" is fictitious. It's effectively praising making 10 cents on a dollar while not counting hundreds of $billions lost on AIG and Fannie Mae, and ignoring $300 billion worth of loan guarantees at Citigroup still in effect.

Moreover, the only reason banks were able to show a profit and pay back TARP loans is mark-to-market rules were delayed further and banks did not have to bring hundreds of billions of dollars in off balance sheet SIVs back on to bank balance sheets.
Many of TARP’s stated goals, however, have simply not been met. Despite the fact that the explicit goal of the Capital Purchase Program (“CPP”) was to increase financing to U.S. businesses and consumers, lending continues to decrease, month after month, and the TARP program designed specifically to address small-business lending — announced in March 2009 — has still not been implemented by Treasury. Notwithstanding the fact that preserving homeownership and promoting jobs were explicit purposes of the Emergency Economic Stabilization Act of 2008 (“EESA”), the statute that created TARP, nearly 16 months later, home foreclosures remain at record levels, the TARP foreclosure prevention program has only permanently modified a small fraction of eligible mortgages, and unemployment is the highest it has been in a generation. Whether these goals can effectively be met through existing TARP programs is very much an open question at this time.
Mish: Question? There is no question. TARP will do nothing for foreclosures or bank lending, not now, not ever.
The substantial costs of TARP — in money, moral hazard effects on the market, and government credibility — will have been for naught if we do nothing to correct the fundamental problems in our financial system and end up in a similar or even greater crisis in two, or five, or ten years’ time.

It is hard to see how any of the fundamental problems in the system have been addressed to date.

• To the extent that huge, interconnected, “too big to fail” institutions contributed to the crisis, those institutions are now even larger, in part because of the substantial subsidies provided by TARP and other bailout programs.

• To the extent that institutions were previously incentivized to take reckless risks through a “heads, I win; tails, the Government will bail me out” mentality, the market is more convinced than ever that the Government will step in as necessary to save systemically significant institutions. This perception was reinforced when TARP was extended until October 3, 2010, thus permitting Treasury to maintain a war chest of potential rescue funding at the same time that banks that have shown questionable ability to return to profitability (and in some cases are posting multi-billion-dollar losses) are exiting TARP programs.

• To the extent that large institutions’ risky behavior resulted from the desire to justify ever-greater bonuses — and indeed, the race appears to be on for TARP recipients to exit the program in order to avoid its pay restrictions — the current bonus season demonstrates that although there have been some improvements in the form that bonus compensation takes for some executives, there has been little fundamental change in the excessive compensation culture on Wall Street.

• To the extent that the crisis was fueled by a “bubble” in the housing market, the Federal Government’s concerted efforts to support home prices — as discussed more fully in Section 3 of this report — risk re-inflating that bubble in light of the Government’s effective takeover of the housing market through purchases and guarantees, either direct or implicit, of nearly all of the residential mortgage market.
Mish: The Report Blasts Geithner and the NY Fed. I seriously doubt Geithner survives this but the sad thing is Geithner will not end up in prison where he belongs.
SIGTARP’s audit, which was issued on November 17, 2009, found, among other things, that the terms of the original FRBNY financing did not result from independent analysis, but were simply an adoption of the term sheet from an aborted private financing discussion, and those terms, which included an onerous effective interest rate of 11%, made modification of the terms and further Government action inevitable.

The audit also found that, in structuring Maiden Lane III, FRBNY attempted to obtain concessions, or “haircuts” from the CDS counterparties — and one counterparty was prepared to take a modest haircut — but the FRBNY’s negotiating strategy was hampered by a series of policy decisions that severely limited its ability to obtain concessions, including its decision not to accept concessions unless concessions could be obtained from all of the counterparties, its refusal to use its leverage as regulator to some of the institutions involved, and its basic discomfort with interfering with the sanctity of the counterparties’ contractual rights. These policy choices led directly to a negotiating strategy with the counterparties that even then-FRBNY President Geithner acknowledged had little likelihood of success. The audit further noted that although Mr. Geithner has denied that his intent was to benefit the counterparties,the overall structure of the AIG bailout resulted in AIG’s counterparties receiving tens of billions of dollars they likely would not have otherwise received had AIG gone into bankruptcy.
Mish: The report also highlights numerous cases of fraud, money laundering, insider trading, and tax evasion . There are 77 active cases are under investigation. Ongoing investigations involve: Omni National Bank, Bank of America, Colonial Bancgroup/Taylor, Bean & Whitaker, AIG, others.
SIGTARP’s Investigations Division has continued to develop into a sophisticated white-collar investigative agency.

Through December 31, 2009, SIGTARP has opened 86 and has 77 ongoing criminal and civil investigations. These investigations include complex issues concerning suspected TARP fraud, accounting fraud, securities fraud, insider trading, bank fraud, mortgage fraud, mortgage servicer misconduct, fraudulent advance-fee schemes, public corruption, false statements, obstruction of justice, money laundering, and tax-related investigations.

While the majority of SIGTARP’s investigative activity remains confidential, developments in several of SIGTARP’s investigations have become public over the past quarter as discussed more fully in Section 1 of this report.

A substantial number of SIGTARP’s ongoing investigations were developed in whole or in part through tips or leads provided on SIGTARP’s Hotline (877-SIG-2009 or accessible at www.SIGTARP.gov). From its inception through December 31, 2009, the SIGTARP Hotline received and analyzed nearly 9,900 contacts, running the gamut from expressions of concern over the economy to serious allegations of fraud.
Mish: Please consider a prime conflict of interest example in regards to PPIP, the Public-Private-Investment-Plan, specifically designed to allow banks to dump their worst assets onto the public (taxpayers) shielding banks from the risk.
Section 5 also provides an update on the issue of imposing conflict-of-interest walls in PPIP, including a discussion of a series of suspect trades that has already occurred within one of the Public-Private Investment Funds (“PPIFs”) in which a portfolio manager directed the sale of a security from a non-PPIF fund under his management to a dealer after the security had been downgraded and then, minutes later, purchased from that dealer the same security at a slightly higher price for the PPIF. SIGTARP is reviewing these trades. The fact that these kinds of issues could arise in the first instance is the direct result of Treasury’s refusal to require information barriers or walls in PPIP, and in an environment in which large portions of the public already view the fairness of Government programs with skepticism, whether fairly or unfairly, the reputational risk associated with this review is a wholly unnecessary cost.
Mish: Note the refutation of the preposterous claims that taxpayers will be made whole.
Contrary to the January 7, 2010, assertion by Treasury that the taxpayer “will be made whole” because the FRBNY loan to Maiden Lane III is on track to being repaid in full, it is clear that any assessment of the costs to the Government and the taxpayer necessarily must look beyond FRBNY’s loan to Maiden Lane III to also take into account both the funds that FRBNY previously loaned to AIG and the subsequent TARP investments. All of these infusions to AIG are linked inextricably: more than half the total amounts paid to counterparties in connection with the CDS portfolio retired through Maiden Lane III did not come about through the Maiden Lane III CDO purchases, but rather from AIG’s earlier collateral postings that were made possible in part by the original FRBNY loan, which was, in turn, paid down with TARP funds. Because of this linkage, the ultimate costs to the Government and the taxpayer cannot be measured in isolation. Stated another way, regardless of whether FRBNY is made whole on its loan to Maiden Lane III, the ultimate value or cost to the taxpayer cannot be calculated until the likelihood of AIG repaying all of its assistance can be more readily determined. Treasury’s recent suggestion to the contrary is, at best, incomplete.
Mish: The report blasts Bernanke's wall of secrecy need. Inquiring minds may also wish to review Secret Deals Involving No One; AIG Coverup Conspiracy Unravels.
SIGTARP’s audit also noted that the now familiar argument from Government officials about the dire consequences of basic transparency, as advocated by the Federal Reserve in connection with Maiden Lane III, once again simply does not withstand scrutiny. Federal Reserve officials initially refused to disclose the identities of the counterparties or the details of the payments, warning that disclosure of the names would undermine AIG’s stability, the privacy and business interests of the counterparties, and the stability of the markets. After public and Congressional
pressure, AIG disclosed the identities of its counterparties, including its eight largest: Société Générale, Goldman Sachs Group Inc., Merrill Lynch, Deutsche Bank AG, UBS, Calyon Corporate and Investment Banking (a subsidiary of Crèdit Agricole S.A.), Barclays PLC, and Bank of America. Notwithstanding the Federal Reserve’s warnings, the sky did not fall; there is no indication that AIG’s disclosure undermined the stability of AIG or the market or damaged legitimate interests of the counterparties.
Mish: Inquiring minds note how insurance companies gamed the system.
The audit also noted that the CPP investments in two insurance companies highlight an incongruity in the CPP program design. Hartford and Lincoln were able to obtain CPP funds by buying small thrift savings institutions and becoming thrift/savings and loan holding companies, thereby meeting the technical criteria for receipt of CPP funds. The amount of CPP funds provided, however, was then determined by the assets of the holding company (i.e., the parent insurance company), not just the assets of the much smaller qualifying thrifts. In the case of Lincoln, for example, the company was able to obtain $950 million in TARP funds after it acquired a thrift that, on its own, would have been able to obtain at most $350,000 (if it would have qualified for CPP funding at all). Moreover, in using TARP funds, there was no requirement that TARP funding be used in connection with the subsidiary thrifts’ activities. As it happened, the insurance companies reported that they used little (in the case of Hartford) or no (in the case of Lincoln) TARP funds in connection with the subsidiary thrifts’ activities but rather used the vast bulk of the funds to support their insurance businesses. Stated another way, simply by purchasing comparatively tiny thrifts, Hartford and Lincoln — companies whose primary businesses (unlike other CPP participants) have little to do with lending to consumers and businesses — gained access to more than $4.3 billion in taxpayer funds, an amount that is many multiples of the thrifts’ total assets.
Mish: Please note the following constitutional questions around the Legality of Executive Branch ‘Czars.’
On October 22, 2009, the Special Master, who was appointed without the advice and consent of the Senate, made determinations concerning executive compensation within AIG, Bank of America, Chrysler Financial, Chrysler, Citigroup, GM, and GMAC.

Following the issuance of the Special Master’s determination, Michael W. McConnell, formerly a judge on the Circuit Court of Appeals for the Tenth Circuit, authored an essay entitled “The Pay Czar Is Unconstitutional” that was published in the Wall Street Journal on October 29, 2009. In his essay, Judge McConnell concluded that “[b]ecause he is not a properly appointed officer of the United States, Mr. Feinberg’s executive compensation decisions were unconstitutional.”
Mish: Here is a table of funds subject to oversight.

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Planned Expenditures Outstanding

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Mish: Looking for institutions in deep financial trouble? You can find them in table 2.10, CCP program missed dividend payments. There are 74 such troubled institutions. Here is a short clip.

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TARP Tutorial: How Taxpayers Lose TARP Money When Banks Fail
The creation of TARP elevated the taxpayers’ exposure to bank failures by making them direct investors in more than 700 institutions — generally as preferred shareholders. The recent bankruptcies of CIT , UCBH, and Pacific Coast National Bancorp, all TARP recipients through CPP , are tangible examples of the risk that failing CPP banks pose to the U.S. taxpayer.

It is impossible to predict how many additional banks will succumb over the next
several years. According to the FDI C website, however, the number of institutions on its “Problem List” is at a 16-year high. As of September 30, 2009, there were 552 insured institutions on the list, the largest number of problem institutions since the fallout from the savings and loan (“S&L”) crisis resulted in 575 institutions being placed on the list by December 31, 1993.91 The FDI C does not publish the names of problem banks on its website for fear that disclosing such information would cause a “run” on the bank’s deposits.

As preferred shareholders, U.S. taxpayers fall in the category of shareholder in many of the Government’s TARP investments. If the institutions fail, the taxpayers, like the other shareholders, will typically lose their investment if there are no remaining funds after creditors have been paid.

On December 31, 2008, Treasury invested $2 billion of CPP funds in CIT , a bank holding company with various commercial finance businesses including lending to small and midsize businesses.112 CIT , which was founded in 1908, is a major lender to small businesses, with more than $60 billion in finance and leasing assets supporting more than one million borrowers.

On November 1, 2009, CIT filed Chapter 11 Bankruptcy. Its depository institution,
CIT Bank, however, did not file bankruptcy. December 10, 2009, CIT ’s shares and
warrants were extinguished, and former holders of preferred shares received contingent value rights (“CVR s”). Theoretically, CVR s place Treasury in a position to recoup part of its investment in CIT .

If, in the future, the senior and junior debt holders are paid back 100%, then any residuals would go to the CVR holders. At this time, it is unlikely that there will be any residual to pay Treasury for its preferred stock investment; in its TARP Financial Statements, Treasury listed the value of its CIT investment as zero.
Making Home Affordable Program
The Making Home Affordable (“MHA”) program was introduced by the Administration on February 18, 2009, as a collection of three major initiatives: a loan modification program, a loan refinancing program, and additional support for reduced mortgage interest rates.

TARP funds are primarily dedicated to one initiative within MHA, the Home Affordable Modification Program (“HAMP”). According to Treasury, HAMP is a $75 billion program that will lower monthly mortgage payments for homeowners by providing loan modification incentive payments to the servicers and loan holders (lenders or investors — referred to as investors in this section) and by protecting against further loss of collateral value. In addition, the MHA program now includes foreclosure alternatives for those not able to complete a HAMP modification.

Of the $75 billion reserved for HAMP, $50 billion will be funded through TARP and will be used to modify private-label mortgages.

Beyond the TARP support, the additional $25 billion in HAMP funding is provided under the Housing and Economic Recovery Act of 2008 (“HERA”) and will be used to modify mortgages that are owned or guaranteed by the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”), two of the Government-sponsored enterprises (“GSEs”).
Mish: By now the failures of HAMP are well documented. Modifications are failing at a massive rate and foreclosures keep making new highs. HAMP is a lost cause. More importantly, Congress allocated unlimited funds to Fannie and Freddie even though losses are soaring.

Because Congress have the Fed a blank check, the Fed is immune from losses that will pile up as a result of its bloated balance sheet as shown below.

According to Federal Reserve Vice Chairman Donald L. Kohn, the Federal
Reserve’s announced purchases of GSE-guaranteed MBS, GSE debt, and Treasury
securities “were successful in reducing long-term interest rates” and “increased the
availability of mortgages to households.”
Mish: Kohn failed to mention the cost or what happens to interest rates as soon as the Fed stops the program. However, because Congress was stupid enough to write a blank check for Fannie and Freddie losses, the Fed can and probably will restart purchases as soon as the economy resumes its slide.

Clearly TARP was a complete failure, that is assuming the goals of TARP were as stated.

My belief is the benefits of TARP and the entire alphabet soup of lending facilities was not as stated by Bernanke and Geithner, but rather to shift as much responsibility as quickly as possible on to the backs of taxpayers while trumping up nonsensical benefits of doing so. This was done to bail out the banks at any and all cost to the taxpayers.

Was this a huge conspiracy by the Fed and Treasury to benefit the banks at taxpayer expense? Of course it was, and the conspiracy is unraveling as documented in this report and as documented in AIG Coverup Conspiracy Unravels.

In spite of massive, predicted in advance fraud, the Treasury still refuses to require information barriers or walls in PPIP.

The result was what many of us predicted all along: TARP fraud, accounting fraud, securities fraud, insider trading, bank fraud, mortgage fraud, mortgage servicer misconduct, fraudulent advance-fee schemes, public corruption, false statements, obstruction of justice, money laundering, and tax-related investigations.

No one should be surprised by these investigations. Indeed the real surprise is there are not more of them.

Mike "Mish" Shedlock
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Deutschland: Vodafone denkt über Stellenstreichungen in D nach…

Gefunden bei sueddeutsche.de:

29.01.2010 04:00 Uhr

Vodafone streicht Stellen

Düsseldorf – Bei dem Mobilfunkkonzern Vodafone droht ein weiterer Stellenabbau in Deutschland. “Ich glaube, dass wir mit weniger Leuten arbeiten werden”, sagte der Chef von Vodafone Deutschland, Friedrich Joussen, am Mittwochabend im Club Wirtschaftspresse in München. Eine Größenordnung nannte er aber nicht.

Derzeit hat die Vodafone-Gruppe, zu der auch der Festnetz-Anbieter Arcor gehört, etwa 13 000 Arbeitsplätze in Deutschland. Im vergangenen Jahr seien bereits rund 600 Stellen weggefallen, sagte Joussen. Dies sei vor allem durch Fluktuation erreicht worden. Zudem wurden mehrere Vodafone-Shops an selbständige Unternehmer ausgegliedert. Angesichts der sinkenden Gewinnmargen in der Telekommunikation sei der Sparkurs unvermeidlich. dpa

Deutschland: Deutsche Börse streicht 10% der Stellen…

Gefunden bei unternehmer.de:

Deutsche Börse streicht Stellen

Von Unternehmer.de

28. Januar 2010 – 09:15

Die Deutsche Börse plant einem Zeitungsbericht zufolge bis zu zehn Prozent ihrer Stellen zu streichen. Von den Plänen betroffen seien alle Töchter des Konzerns, der insgesamt rund 3300 Mitarbeiter beschäftigt, berichtete das «Handelsblatt» (Donnerstagausgabe) unter Berufung auf Finanzkreise.

Ein Sprecher des Frankfurter Börsenplatzbetreibers wollte die Informationen gegenüber der Zeitung nicht bestätigen.

Das Unternehmen reagiert dem Bericht zufolge mit dem Stellenabbau auf das durch die Krise schwächer gewordene Geschäft im Wertpapier- und Derivatehandel. Das Unternehmen leide unter der fehlenden Investitionsbereitschaft der Anleger infolge der weltweiten Finanzkrise und dem zunehmenden Wettbewerb der durch Banken gegründeten neuen elektronischen Handelsplattformen (MTF). Auch Pläne der US-Regierung den Eigenhandel zu beschränken seien eine Belastung des Geschäfts.

(Quelle: ddp)

Unternehmer.de-Redaktion: Klaus Müller

Deutschland: Siemens streicht 2.000 Stellen in Deutschland

=> “Kurzarbeit reicht nich tmehr aus”… Gefunden bei zeit.de:


Siemens streicht 2000 Jobs – Kritik von IG Metall

München (dpa) – Der Elektrokonzern Siemens reagiert mit dem Abbau von rund 2000 Arbeitsplätzen in Deutschland auf die anhaltende Wirtschaftskrise. Betroffen sind die Antriebstechnologie und das Geschäft mit Großanlagen für die Industrie, wie die Siemens AG in München mitteilte.

Mit den Anpassungen will das Unternehmen Nachfrageeinbrüche aus dem Maschinenbau und die zurückhaltende Investitionstätigkeit bei Industrieanlagen abfangen. Hinzu komme ein Technologiewechsel bei bestimmten Produkten. «Wir stehen zu unserer Zusage, dass wir Anpassungen bei den Beschäftigten möglichst ohne betriebsbedingte Kündigungen lösen wollen», sagte Siemens-Personalchef Siegfried Russwurm. Man wolle zügig Gespräche mit den Arbeitnehmervertretern aufnehmen. Die IG Metall reagierte mit scharfer Kritik auf die Pläne.

Der Konzern war mit einem überraschend hohen Gewinnsprung ins neue Geschäftsjahr 2009/10 (30. September) gestartet und hatte eine Anhebung seines operativen Ergebnisziels für dieses Jahr angedeutet. Trotzdem hatte Konzernchef Peter Löscher die Beschäftigten bei der Hauptversammlung am Dienstag angesichts massiver Auftrags- und Umsatzeinbußen bereits auf weitere personelle Einschnitte vorbereitet. Die Details stellte die Unternehmensleitung den Betriebsräten am Donnerstag im Wirtschaftsausschuss vor.

In der Antriebstechnologie ist demnach der Standort Bad Neustadt (Saale) in Unterfranken betroffen, wo bis 2012 rund 840 der heute knapp über 2000 Arbeitsplätze wegfallen sollen. In Bad Neustadt und im tschechischen Mohelnice fertigt Siemens Standard- Niederspannungsmotoren kleiner Leistung für Europa. Die Einführung der nächsten Produktgeneration mache Investitionen in Fertigungslinien und eine Bündelung der Produktion in Mohelnice nötig, erklärte das Unternehmen. Dadurch fielen in den kommenden zweieinhalb Jahren 640 Jobs in Bad Neustadt weg. Die übrigen 200 wegfallenden Stellen in Bad Neustadt sowie weitere 300 Arbeitsplätze am Standort Erlangen, wo die zugehörige Elektronik für die Motoren gefertigt wird, begründete Siemens mit massiven Auftragsrückgängen aus dem Maschinenbau.

Weitere 850 Stellen sollen in der Division Industry Solutions gestrichen werden, in der Siemens unter anderem Großanlagen für die Stahl-, Zement- und Papierbranche zusammengefasst hat. Hier sei der Tiefpunkt der Auslastung erst für das Jahr 2011 zu erwarten, erklärte das Unternehmen. Betroffen von den Maßnahmen sind mehrere Standorte in Deutschland. Insgesamt beschäftigt Siemens in Deutschland 128 000 Menschen, weltweit hat der Konzern rund 405 000 Beschäftigte.

Nach dem massiven Produktionseinbruch im Maschinenbau von 20 Prozent im vergangenen Jahr sei derzeit keine Rückkehr auf das Niveau vor der Krise in Sicht, sagte der Chef des Siemens-Industriesektors, Heinrich Hiesinger, in einer Telefon-Konferenz. Auf die Frage, ob weitere Einschnitte zu befürchten seien, erklärte Personalvorstand Russwurm: «Wir haben heute mit den Arbeitnehmervertretern all das diskutiert, was zu diskutieren war.» Es gebe keine verdeckte Agenda, die weitere Schritte enthalte.

Die IG Metall erklärte, es sei nicht nachvollziehbar, dass der Vorstand über eine Anhebung seiner Prognosen nachdenke und gleichzeitig nach einer Salami-Taktik scheibchenweise Bereiche und Geschäfte abstoße. «Die imageträchtig skizzierte strahlende Zukunft verwirklicht Siemens nicht, indem man ständig Beschäftigte vor eine ungewisse Perspektive stellt», sagte Gesamtbetriebsratschef Lothar Adler. Zusammen mit der Gewerkschaft forderte er den Konzern auf, Alternativen zu dem Abbau zu entwickeln. Bei Siemens läuft bereits der Abbau von rund 17 000 Arbeitsplätzen, vor allem in Vertrieb und Verwaltung.

Bayerns Ministerpräsident Horst Seehofer (CSU) bezeichnete die Sparpläne als «Hiobsbotschaft». Zugleich äußerte er Verständnis für die Entscheidung des Managements. Der Fall zeige, dass die realen Auswirkungen der Wirtschaftskrise erst jetzt auf dem Arbeitsmarkt durchschlügen, sagte Seehofer am Donnerstag in Brüssel. Es komme irgendwann der Punkt, wo man krisenbedingte Ausfälle nicht mehr mit Kurzarbeit auffangen könne. Der bayerische Wirtschaftsminister Martin Zeil (FDP) sprach von einem herben Schlag für die betroffenen Beschäftigten und ihre Familien. Zugleich erklärte der Minister: «Siemens hat mir zugesichert, die Anpassungen möglichst ohne betriebsbedingte Kündigungen vorzunehmen.»

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